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The Finance Society The Finance Society

The Finance Society - PDF document

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Uploaded On 2015-09-16

The Finance Society - PPT Presentation

Screen Clear ers Traders Clear Traders Clear ing House Investors Moderator OPEN OUTCRY TRADING GAME MANUALBy Siwen WuI IntroductionThe Open Outcry Trading Game is designed to simulate pit trading ID: 130265

Screen Clear ers Traders Clear & Traders Clear ing House Investors Moderator OPEN OUTCRY TRADING

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Screen Clear ers Traders Clear & Traders Clear ing House Investors Moderator The Finance Society OPEN OUTCRY TRADING GAME MANUALBy Siwen WuI. IntroductionThe Open Outcry Trading Game is designed to simulate pit trading in a real life security exchanges, where investors’ orders are executed and bid functions of the clearers, clearing house, moderator and regulators will be performed by Finance Society Executive Board and Executive Committee Members.The following are a list of the roles and detailed responsibilities in this game:Investors:Convey investment decision to pit traders verbally and nonverbally (i.e. buy/sell, quantities) Monitor periodic news releases via online chatroomsKeep track of cash level, position and P/LPit traders: Execute investors’ orders by trading with others in the pitsQuote the market when askedMonitor bid/ask quoted by other traders in the pitSubmit completed trade tickets to clearersKeep track of investor positionClearers:Collect completed trade tickets in chronological orderVerify trade validity by matching trade tickets of both trading partiesPostlast traded price in the pits on big screenClearing house:Obtain completed trade tickets from clearers in the pitsEnter trades into spreadsheetDeliver trade tickets to investorsModerator:Announce start and end of tradingDistribute predeterminedmacroeconomic news stories to investors via online chatroomRegulators:Monitor activities in the pits and deter any illegal activitiesScheduleIntroduction minutesOpen Outcry Session 1minutesBreak/Standings Updateminutes Open Outcry Session 2minutesBreak/Standings UpdateminutesOpen Outcry Session 2utesBreak/Standings UpdateminutesClosing Remarks and Award Ceremonyminutes III. The Game:Startof SessionEach investor will be allocated with $100,000 at the beginning of each session. Two securities will be traded each session (one per pit). Pit traders will assume designated positions inside pits and will be given a trade ticket pad. Investors will join chatroom in order to receive periodic news during trading session. The moderator will then provide information on current economic state to participants and announce the start of trading.Trading:After the session beginspit traders will look for orders from their respective investors, who will signal to the pit traders whether they wish to buy/sell and the quantity desired. Upon receiving the order, the pit trader must seek to complete the trade with another trader. The pit trader must indicate whether he/she is a buyer or seller and inquire the price at which other traders in the pits are willing to buy from/sell to him/her. The pit trader then can make a deal at the price which he/she deems the most appropriateand at a contract sizes agreed upon by both parties. Example: Pit trader A receives a buy order of GE from Investor A of 10 shares.Pit trader A(to pit trader B): I’m buying, what’s your ask? Pit trader B: 11.50Pit trader A(to pit trader C): what’s your ask?Pit trader C: 11.25Pit trader A: Done at 11.25. How many times?Pit trader C: 5 sharesPit trader A: Ok. Done.Thus, pit trader A bought 5 shares of GE from pit trader C at $11.25. However, since pit trader A needed to buy 10 shares, he/she must repeat the same process to obtain the other 5 shares.Note: Due to the distance between investors and his/her pit traders and the large amount of noise expected during the game, it is recommended that team members create a set of verbal signs such as hand signals to convey investment decisions in addition to voice communication. When one party inquires the price, the second party cannot refuse to give a price at which he/she would buy or sell. However, if the second party does not intend to make the transaction, he/she shouldquote a bid that is far below the market value and an ask that is far above the market value to discourage the other party from agreeing to the trade.After agreeing to the trade, both parties must fill out the trade ticket with the security, quantityriceat which the trade was doneand the buyer and seller team nameIn addition, each trader should inform their investor of the trade execution. In a valid trade completed by two parties, the trade tickets should look identical (see below). The two rties will thenear off the trade ticket and hand them to clearers, who will examine them for any discrepancies. TradeClearing:Clearers in the center of the pit will match the trade tickets and void any invalid trades. The clearers will inform the moderator of the last traded price in each pit and the latter will post the new price on the big screen. Confirmed trade tickets willbe delivered to clearers table, where the transactions will be entered under each team. Once trades are entered, trade tickets will be transferred to investors for record keeping.Note: Investors should enter the transaction upon receiving the trade tickets to keep track of cash balance, position and P/L. Negative cash balance will be subject to penalties (seerules).Session’s End:The moderator will announce a 2minute warning prior to the end of each session. Teams are not required to offset outstanding positions at the end of the sessions. The remaining positionwill be valued markmarket at the price that is last traded in the pits prior to the close.How to WinThe winner of the game will be the team with the highest aggregate profit and loss of the three sessionsIn case of a tie, the winner will be the team with the greater volume traded.Performance will ultimately depend on the ability of the investor and the trader to convey information effectively and act quickly to take advantage of price movements in the market. IV. Miscellaneousulesand penaltiesAny manipulation of trade records and security prices inside trading pits are prohibitedommunication of breaking news between the investor and tradeis prohibited.No transaction fees will be imposedA 5% penalty fee will be imposed on the value of any transaction made with negative cash balanceVulgar language is strongly discouraged.TechnologyWireless laptops will be provided to and used by each investor and moderatorAttireBusiness FormalHave fun, Be Loud and Make Money!